Changyu Wine

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Yantai Changyu Group Company Limited (the Group) is a holding company controlling a 53.8% stake in Yantai Changyu Pioneer Wine Company Limited (Changyu or the company), a Shenzhen-listed company involved in the production and distribution of wine, sparkling wine, tonic wine, and brandy. The Group also has minor operations in a hotel, a tourist company and a general service company. Established in 1892, Changyu is the oldest and largest wine producer in China, with cumulative output of 80,000 tons per annum of wine products and a domestic market share of 21%. Changyu has nationwide distribution channels and a wide product range from low-end to high-end wines. Changyu currently generates more than 75% of its revenue from wine, grape cider, tonic wine and sparkling wine products and less than 25% from brandy products. The company expects to grow mainly through expanding the core wine operation, in a growing wine market in China. The Yantai City People’s Government State Assets Supervision and Administration Commission (Yantai Government) of Shandong Province currently controls 55% of the Group and intends to sell 43% of its stake to foreign investors. The shares are planned to be sold in two tranches of 33% and 10% each to two separate investors. The proceeds from the sale will accrue to the Yantai Government, which has requested IFC to consider taking a stake in the Group. The proposed IFC investment is to purchase the 10% stake in the group, representing an equity investment of about $20 million.